The IMF’s new governance assessment offers one of the most comprehensive dissections of the state in years and its findings leave little room for comforting illusions. Pakistan loses an estimated five to six and a half per cent of GDP over five years because its institutions cannot provide transparent budgeting, predictable regulation or credible enforcement. Few reports have quantified the cost of institutional decay with such blunt clarity. Governance weakness is no longer a philosophical complaint or a make-believe conspiracy theory. It is, to be blunt, the largest drag on national growth and the reason the country lurches from crisis to crisis even when global conditions are relatively benign.
Our budget is the clearest demonstration of this dysfunction where supplementary grants keep aiming for higher and higher records. Last year, parliament approved roughly nine trillion rupees for expenditure overruns, nearly five times more than the previous cycle. That alone shows how spending decisions have moved outside the circle of parliamentary control, reducing the budget to an exercise in endorsing what the executive has already put in motion.
The tax regime reflects an equally troubling imbalance. Roughly three-quarters of all federal tax revenue is collected through indirect levies, which fall disproportionately on lower and middle-income households and only a fraction through direct taxation of income and assets. Whether anyone acknowledges it or not, this distribution is the consequence of decades of exemptions, discretionary orders and negotiated privileges that allow well-connected groups to avoid meaningful contribution.
The pattern extends into the judiciary and regulatory agencies, where slow adjudication, inconsistent rulings and political interference have created an environment in which contracts are difficult to enforce and property rights remain vulnerable to influence rather than protected by law. State-owned enterprises, whose combined assets are worth nearly half of GDP, continue to absorb public money while delivering minimal efficiency gains. Regulators lack independence, technical expertise or statutory protection and often defer to the very interests they are mandated to supervise.
Investment does not avoid Pakistan because opportunities are absent. It avoids Pakistan because certainty is absent.
Every government blames its predecessor for this landscape, yet the pattern has endured across administrations. Even now, the PTI is quick to seize upon the report as proof of the current government’s failures while offering no acknowledgment of the distortions created under its own watch, including policies that strengthened the very networks of privilege it now criticises.
The proposed recommendations are hardly revolutionary. Greater budget discipline, full disclosure of state-owned enterprise liabilities, removal of discretionary tax exemptions, strengthened audit autonomy and predictable regulatory oversight are measures that most functional states adopt as routine practice. Pakistan treats them as contentious reforms only because each touches a vested interest that benefits from the present disorder. Yet the cost of inaction grows heavier with each passing year. *